Michael Burry, famous for predicting the housing market collapse, has wagered over a billion dollars that the AI boom is about to burst.
Michael Burry has made a career out of seeing what others miss. The investor who famously predicted the 2007 housing market crash, immortalized by Christian Bale in the 2015 film The Big Short, has now placed a massive $1.1 billion bet that the artificial intelligence sector is heading for a dramatic correction.
Through his investment firm Scion Asset Management, Burry has purchased $912 million in put contracts on software company Palantir and $187 million in Nvidia shares, financial instruments that profit when stock prices fall. The move signals his conviction that the current AI investment frenzy has inflated valuations far beyond what the technology can realistically deliver.
Burry's timing reflects growing skepticism about whether the AI boom can justify the astronomical sums being poured into the sector. Nvidia, the chipmaker powering AI data centers, recently became the first publicly traded company to exceed $5 trillion in market value, surpassing Germany's entire GDP.
Palantir's stock has soared 400 percent in a year. Yet a Massachusetts Institute of Technology report from August found that the vast majority of AI investments were yielding zero returns for businesses. Even Sam Altman, CEO of OpenAI, acknowledged in the summer that investors were overexcited. Goldman Sachs' David Solomon warned that most of the $161 billion poured into AI this year would ultimately fail to deliver returns.
The community's response has been decidedly mixed. While some observers view Burry's track record as a credible warning sign, others express caution about betting against markets that can remain irrational far longer than any single investor's patience or capital. Commenters have noted the irony that Burry's previous success came with controversy, including questions about how his early investors fared during his legendary housing market bet. The discussion reflects a broader tension in financial markets: the difficulty of timing a crash versus the genuine concern that valuations have become untethered from reality.
What makes Burry's move particularly noteworthy is not necessarily that he will be proven right, but that it crystallizes a debate already simmering among serious investors and analysts. The AI sector has undeniably transformed technology stocks and captured investor imagination, yet fundamental questions remain about profitability and sustainable returns.
Burry's $1.1 billion wager is less a prediction and more a statement that someone with a proven eye for market excess believes the current moment resembles previous bubbles. Whether the market agrees remains to be seen, but his move has already rattled confidence, with Nvidia shares dropping 2 percent and Palantir falling nearly 7 percent on the news. This may be surprising for those currently taking online artificial intelligence courses. The booming industry has grown exponentially over the past few years, driven at least in part by the ubiquity of LLMs like ChatGPT and Gemini.
The real question may not be whether Burry is right about an AI correction, but when and how dramatically it might unfold. History suggests that bubbles rarely deflate gently, and investors who have ridden the AI wave higher may soon face uncomfortable questions about whether their positions are based on fundamentals or momentum. Burry's bet is a reminder that even in an era of seemingly endless capital and optimism, skepticism has its place. There's more coverage on this topic at LBC.
